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    CFAS Discussion

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    Xiunah Minynne
    The document discusses the components and objectives of financial statements. Financial statements communicate key financial information about a company's performance and position, and comprise elements such as the statement of financial position, income statement, statement of cash flows, and notes. They are prepared at minimum annually and provide quantitative data to help decision-makers like owners and investors assess the company's liquidity, solvency, and need for financing. The statements classify assets as current, meant to be realized within a year, and noncurrent, and liabilities as current, due within a year, or noncurrent.

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    CFAS Discussion

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    Xiunah Minynne
    28 views5 pages
    The document discusses the components and objectives of financial statements. Financial statements communicate key financial information about a company's performance and position, and comprise elements such as the statement of financial position, income statement, statement of cash flows, and notes. They are prepared at minimum annually and provide quantitative data to help decision-makers like owners and investors assess the company's liquidity, solvency, and need for financing. The statements classify assets as current, meant to be realized within a year, and noncurrent, and liabilities as current, due within a year, or noncurrent.

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    Conceptual Framework in Accounting Standards Discussion Questions and Answers

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    CFAS discussion

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    The document discusses the components and objectives of financial statements. Financial statements communicate key financial information about a company's performance and position, and comprise elements such as the statement of financial position, income statement, statement of cash flows, and notes. They are prepared at minimum annually and provide quantitative data to help decision-makers like owners and investors assess the company's liquidity, solvency, and need for financing. The statements classify assets as current, meant to be realized within a year, and noncurrent, and liabilities as current, due within a year, or noncurrent.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    28 views5 pages

    CFAS Discussion

    Uploaded by

    Xiunah Minynne
    The document discusses the components and objectives of financial statements. Financial statements communicate key financial information about a company's performance and position, and comprise elements such as the statement of financial position, income statement, statement of cash flows, and notes. They are prepared at minimum annually and provide quantitative data to help decision-makers like owners and investors assess the company's liquidity, solvency, and need for financing. The statements classify assets as current, meant to be realized within a year, and noncurrent, and liabilities as current, due within a year, or noncurrent.

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    of 5

    CFAS Discussion (page 161)

    1. What are financial statements?


     Financial statements are like the mouth of the accounting process. It
    conveys important quantitative and relative information such as the
    financial performance of the company that helps in business decisions
    and aids the users of the accounting information. Financial statements
    very purpose is to communicate to the proprietor of what happened to
    the capital that he put into the business.

    2. What are the components of financial statements?


     The components of the financial statements contain:
    a. Statement of Financial Position
    b. Income Statement
    c. Statement of Comprehensive Income
    d. Statement of Changes in Equity
    e. Statement of Cash Flows
    f. Notes, comprising a summary of significant accounting
    policies and other explanatory notes

    3. Explain the objective of financial statements.


     The objective of financial statements is to offer information about the
    financial position, financial performance and cash flows of an entity
    that is valuable to an extensive scope of users in formulating
    economic decisions. Moreover, financial statements provide
    information about the assets, liabilities, equity, income and expenses,
    gains, losses, capital and cash flows of the entity. Thus, financial
    statements show the capability, activities, and performances of the
    business which can significantly ang critically benefits the decision
    makers such as the owners and current or future investors.

    4. What is the frequency of reporting of financial statements?


     Financial statements shall be prepared and presented at least annually.
    Moreover, reporting may be a calendar year or a natural business year.
    To define, calendar year is when the accounting period will begin on
    January 1 and will end on December 31 of the same year. There are
    four (4) quarters in a calendar year and each quarter consists of three
    (3) months. On the other hand, fiscal year happens when the
    accounting period will begin on the first day of any month of the year
    except January and will end on the last day of the twelfth month
    completing the one-year period.

    5. Define a statement of financial position.


     A Statement of Financial Position is a formal statement displaying the
    three elements including financial position, specifically assets,
    liabilities and equity. Assessment of the factors such as liquidity,
    solvency and the need of the entity for additional financing aids the
    investors, creditors and other statement users when they scrutinize the
    statement of financial position.

    6. What are the essential characteristics of an assets?


     An asset has a future economic benefit. It is also controlled by a
    particular entity. Additionally, assets can be determined by occurrence
    of the past transaction or events.

    7. What are the classification of assets?


     Assets are categorized only into two, explicitly current assets and
    noncurrent assets.

    8. Define current assets.


     Current assets are typically enumerated in the order of liquidity. Also,
    current assets are expected that to be realized in a short span of time
    or within twelve months after the reporting period. It is also expected
    to be consumed within the entity’s normal operating cycle. Its primary
    purpose is to trade. Moreover, an asset is said to be current when it is
    cash or cash equivalent.

    9. What are the line items for current assets?


     The line items under current assets are:
    a. Cash and cash equivalents
    b. Financial assets at fair value such as trading securities and
    other investments in quoted equity instruments
    c. Trade and other receivables
    d. Inventories
    e. Prepaid expenses

    10.Define noncurrent assets.


     Noncurrent assets are those assets not included in the current assets
    such as property, plant and equipment, long-term investments,
    intangible assets, deferred tax assets and other noncurrent assets.

    11.Identify the noncurrent assets.


     Noncurrent assets are company's long-term assets that are not easily
    converted to cash within a year. Examples include investments,
    intellectual property, real estate and equipment.

    12.What ere the essential characteristics of a liability?


     The essential characteristics of a liability are:
    a. it embodies a present duty or responsibility to one or more
    other entities that requires settlement by possible future
    transfer or usage of assets at a stated or determinable date, on
    occurrence of a specified event, or on demand
    b. the duty or responsibility necessitates a particular entity,
    leaving it little or no discretion to avoid the future sacrifice
    c. the transaction or other event obligating the entity has already
    happened.

    13.What are the classifications of liabilities?


     The classifications of liabilities are classified as current liability and
    noncurrent liability.

    14.Define current liabilities.


     Current liabilities are a company's short-term financial obligations
    that are due within one year or within a normal operating cycle

    15. What are the line items for current liabilities?


     The following line items for current liabilities, namely:
    a. Trade and other payables
    b. Current provision
    c. Short term borrowing
    d. Current portion of long-term debt
    e. Current tax liability

    16.Explain the treatment of currently maturing long-term debt.


     The treatment of currently maturing long-term debt is the amount of
    principal that will be due within one year of the date of the balance
    sheet. It is completed on or before the end of the reporting period.

    17.Explain the effect of breach of covenants on the classification of liability.


     PAS 1, paragraph 74, provides that the liability is classified as current
    if the lender has agreed, after the reporting period and before the
    statements are authorized for issue.
     Paragraph 75, provides that the. liability is classified as noncurrent if
    the lender has agreed on or before the end of reporting period.

    18.What are the elements comprising the equity of a corporation?


     The elements comprising the equity of a corporation are: Capital
    stock, subscribed capital stock, preferred stock, Common stock,
    Additional paid capital, retained earnings (deficit), Retained earnings
    appropriated, Revaluation surplus and Treasury stock.

    19.What is the meaning of “notes to financial statements”?


     Notes to financial statements are narratives or disaggregation of items
    presented in the financial statements and information about items that
    do not qualify for recognition.

    20.Explain the two forms of statement of financial position.


     There are two customary forms in presenting the statement of
    financial position:
    a. Report form - The report form balance sheet is presented in a
    vertical orientation, and is essentially one column that spans
    the entire width of a page
    b. Account form - The account form refers to a two-column
    format for the presentation of the balance sheet. Assets are
    listed in the first column, while liabilities and equity accounts
    are listed in the second column.

    Sources:
     Valix, C., Peralta, J., & Valix, C. A. (2020). Conceptual Framework and Accounting
    Standards (2020th ed.). GIC Enterprises & Co., INC.

     Lopez, Jr., R. (2019). Bookkepping (2018th-2019 ed. ed.). MS Lopez Printing & Publishing.

     Nandwani, M. (2016, June 18). Assets: Definition, Characteristics and Objectives. Learn
    Accounting: Notes, Procedures, Problems and Solutions.
    https://www.accountingnotes.net/assets/assets-definition-characteristics-and-objectives/5341

     Jackson, B. (n.d.). The Financial Accounting Standards Board.


    https://www.fasb.org/jsp/FASB/CommentLetter_C/ViewCommentLetter&cid=11758033012
    43

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